Successful supply chain management requires an effective shift from the Production scheduling aims to maximize the efficiency of operations and reduce costs. Scheduling software allows planners to see how this might be done, enabling . to outsource the logistics aspect of supply chain management by partnering. A) An increased sales effort may help a firm reach its profit goals more easily than would .. Supply chain managers outsource logistics to meet three goals. Supply chain management (SCM) enables enterprises to source the raw is efficient, effective, delivers value to customers, and meets enterprise goals. Peer into the future of logistics with "AI in the supply chain: Logistics gets smart. Many organizations outsource large parts of the delivery process to.
The key is to determine how to outperform competitors in a cost-effective manner. If a table manufacturer needs a specific type of wood to produce all its table legs but that wood type is not available, it may force the plant to stop or close down until the material arrives, thereby incurring expensive delays, potential lost sales, and decreased customer satisfaction.
In contrast, if a home improvement store experiences a one-day delay in inventory replenishment of watt night-light bulbs at its warehouse, the impact on profit and operational performance is likely to be very low and insignificant.
In the majority of situations, the cost-benefit impact of a logistical failure is directly related to the importance of the service to the customer. Such service implies that the customer order was complete, delivered on time, and consistently correct over time.
Cost Minimization The second element of the value proposition, cost minimization, should be interpreted as the total cost of logistics in order to be accurate. As they learned later, that did not work very well. What is Logistics Goals and Strategies: At the highest level, logistics management shares the goal of supply chain: Respond rapidly to changes-in the market or customer orders.
Minimize variances in logistics service. Minimize inventory to reduce costs. Consolidate product movement by grouping shipments. Maintain high quality and engage in continuous improvement. Support the entire product life cycle and the reverse logistics supply chain. An effective logistics management strategy depends upon the following tactics: Coordinating functions transportation management, warehousing, packaging, etc.
Integrating the supply chain.
Reducing supply chain partners to an effective minimum number. Logistics can be viewed as a system made up of interlocking, interdependent parts.
From this perspective, improving any part of the system must be done with full awareness of the, effects on other parts of the system. Before the advent of modern logistics management, however, the various operations contributing to the movement of goods were usually assigned to separate departments or divisions, such as the traffic department. Each area had its own separate management and pursued its own strategies and tactics.
Decisions made in any one functional area, however, are very likely to affect performance in other areas, and an improvement in one area may very well have negative consequences in another unless decisions are coordinated among all logistics areas.
Adopting more efficient movement of goods, for example, may require rethinking the number and placement of warehouses. Different packaging will almost certainly affect shipping and storage. You may improve customer service to a level near perfection but incur so many additional expenses in the process that the company as a whole goes broke.
You need a cross-functional approach in logistics, just as you do in supply chain management as a whole. Teams that cross functions are also very likely to cross company boundaries in a world of international supply chains with different firms focused on different functions. The overall goal of logistics management is not better shipping or more efficient location of warehouses but more value in the supply network as measured by customer satisfaction, return to shareholders, etc.
There is no point, for instance, in raising the cost of shipping—thus, the price to the customer—to make deliveries faster than the customer demands. Paying more to have a computer delivered today rather than tomorrow may not be a tradeoff customers want to make.
Getting a still-warm pizza delivered in less than 20 minutes, however, might be worth a premium price and a tip. Fast delivery, in other words, is not an end in itself, and the same is true of any aspect of logistics management or supply chain management. Integrating the Supply Chain: Integrating the supply chain requires taking a series of steps when constructing the logistics network. In a dynamic system, steps may be taken out of order and retaken continuously in pursuit of quality improvements; the following list puts the steps in logical order.
Identify all geographic locations in the forward and reverse supply chains. Analyze the forward and reverse chains to see if selecting different geographic locations could make the logistics function more efficient and effective.
Not all countries are equal in terms of relevant concerns such as infrastructure, labor, regulations, and taxes. Determine the volume of freight and number of SKUs stockkeeping units that are imports and exports. Decide where to place inventory for strategic advantage. This may involve deciding which borders to cross and which to avoid when importing and exporting as well as determining where goods should be stored in relation to customers.
Both geographic location and distance from the customer can affect delivery lead times. Determine the optimal number of warehouses. Calculate the optimal distance from markets. Establish the most effective placement of warehouses around the world. Determine the mix of transportation modes that will most efficiently connect suppliers, producers, warehouses, distributors, and customers. Select the minimum number of firms freight forwarders and 3PLs or a 4PL to manage forward and reverse logistics.
In selecting logistics partners, also consider their knowledge of the local markets and regulations. Reduce inventory costs by more accurately and rapidly tracking demand information and the location of goods.
Developing state-of-the-art information systems may be difficult in some regions. Such situations make defining the processes and information flows even more critical.
Physical inventory can be replaced by better information in the following ways: Talk with suppliers regularly and discuss plans with them. Use HT to coordinate deliveries from suppliers. Use continuous improvement tools and share observations about trends.
Keep inventory in transit. One method of keeping inventory in motion the maximum amount of time is a distribution strategy called cross-docking. Used with particular success by Wal-Mart, cross-docking involves moving incoming shipments directly across the dock to outward-bound carriers. The inventory thus transferred may literally never be at rest in the warehouse.
What is Logistics Management?
Another example of cross-docking can be taken from the airline industry. When a passenger travels from Seattle to New York, he or she might be cross-docked in Chicago. The airline has configured their network in this way as opposed to having direct flights from city to city. Passengers are not warehoused per se but simply pass through the airport in an hour or two, getting off of one plane and onto another. At the end of the day, ideally the airport should be empty, as should all cross-docking locations.
A trailer, railcar, or barge can be considered a kind of mobile warehouse. Rolling inventory should be closely tracked by GPS to facilitate rapid adjustments if a shipment is delayed or lost or if a customer changes an order at the last minute. Avoid filling warehouses with the wrong mix of finished goods by setting up postponement centers to delay product assembly until an actual order has been received.
In the next section, we specify the definitions of the terms of logistics and supply chain used in our paper, with a comparison between these two popular conceptions. In Section 3which is the core section of this paper, we provide several hot topics in current research with detailed examples. In Section 4we provide insights and further research directions. Conception and Scope 2. Logistics Logistics is the management of the flow of goods between the point of origin and the point of consumption in order to meet some requirements, for example, of customers or corporations.
The resources managed in logistics can include physical items, such as food, materials, animals, equipment, and liquids, as well as abstract items, such as time, information, particles, and energy. The logistics of physical items usually involves the integration of information flow, material handling, production, packaging, inventory, transportation, warehousing, and often security.
The complexity of logistics can be modeled, analyzed, visualized, and optimized by dedicated simulation software. The minimization of the use of resources is a common motivation in logistics for import and export. Note that the above definition of logistics is not unified, although it might be indeed, in current environment, a commonly acknowledged one. As we can see, the concept of logistics focuses on the product flow, which is the meaning by which this word has been translated in Chinese.
It also puts emphasis on the activities of handling product, which include the storage, transportation, distribution, and packaging and processing. Although business logistics involves many activities, the traditional research of operations management on logistics mainly relates to the fields of logistics facility, transportation, and inventory planning.
Generally speaking, supply chain is a more broadened conception with a wider range which can involve other similar subjects, such as network sourcing, supply pipeline management, value chain management, and value stream management [ 3 — 5 ]. In addition, we can see that the conception of logistics has no relationship with organization, which is the opposite of supply chain, since supply chain is made up of multiple organizations, usually companies. An important issue in supply chain management is that companies will not seek to achieve cost reductions or profit improvement at the expense of their supply chain partners but rather seek to make the supply chain as a whole more competitive.
Hence, the contention that it is supply chains, and not a single company, that compete is a central tenet in the field of supply chain management [ 6 ]. A central research methodology for supply chain management is game theory and also incentive theory for the scenario of incomplete information.
Hot Issues Due to the extensive research ranges in operations management of logistics and supply chain management, we cannot possibly make a comprehensive review in one paper. In this section, we point out several of the most important issues and hot topics in recent research, which draws great attention from both academy and industry.
Inventory and Transportation Management on Specific Fields As has been pointed out in the previous section, the operations research on logistics management still mainly focuses on the traditional domain, that is, the inventory including production planning and transportation management.
However, a noticeable phenomenon is that most papers are putting emphasis on specific fields with remarkable features captured into their models and thus making new contributions to the literature. For example, the inventory management of perishable products also referred to as deteriorating product is a rather old and mature field in logistics and supply chain management, with replenishment policies for inventory being the main focus of study.
Whitin [ 7 ] investigated such a problem, where fashion goods deteriorating at the end of certain storage periods were considered. Since then, considerable attention has been paid to this line of research. Nahmias [ 8 ] provides a comprehensive survey of research published before the s.
However, new models can still be developed to capture the current management feature and obtain new managerial insights. Generally, two types of perishable loss, quantity loss and quality loss, may take place for a perishable product. The majority of the literature has dealt mainly with only one type of loss. In this regard, Cai et al.
During the transportation process, the distributor has to make an appropriate effort to preserve the freshness of the product, and his success in this respect impacts both the quality and quantity of the product delivered to the market.
Another important field is transportation. It is generally known that the research on VRP vehicle routing problem and its various extensions has been extensive. However, other new domains on transportation can still be interesting topics. For example, the remarkable growth in intermodal transportation over the past decade has not been matched by a comparable level of academic activity, and, hence, the research on intermodal transportation appears to have a great potential.
Chang [ 14 ] explores one of the intermodal operational issues: The problem is formulated as a multiobjective multimodal multicommodity flow problem with time windows and concave costs, and an efficient heuristic is proposed.
Vermaa and Verter [ 15 ] present a first attempt for the development of an analytical framework for planning rail-truck intermodal transportation of hazardous materials by developing a biobjective optimization model to plan and manage intermodal shipments to represent the current practice; the routing decisions in the model are driven by the delivery times specified by the customers.
Bruns and Knust [ 16 ] study the problem of load planning for trains in intermodal container terminals. The objective is to assign load units to wagons of a train such that the utilization of the train is maximized and setup and transportation costs in the terminal are minimized. The goal of load planning is to choose wagon settings and assign load units to wagons of a train such that the utilization of the train is maximized and setup and transportation costs in the terminal are minimized.
The solution has been applied to a real-world problem from one of the largest Spanish companies using intermodal transportation. Sourcing and Marketing in Supply Chain Sourcing is the first step in a supply chain. The research on sourcing has been extensive in recent years.
This leaves open room for a supplier to improve efficiency over time by further optimizing the production processes. This dynamic change of supply costs affects the negotiation of sourcing contracts. A noticeable issue is the utilization of auctioning in the sourcing strategy. An optimal procurement strategy is considered for the buyer who first specifies a payment for each possible purchase quantity and then invites the suppliers to bid for this contract.
The auction can be conducted in many formats such as the English auction, the Dutch auction, the first-priced auction, sealed-bid auction, and the Vickrey auction. Chen and Vulcano [ 23 ] study a supply chain where an upstream supplier auctions his inventory or capacity as a bundle, which formulates the problem as a two-stage supply chain comprising a single supplier and two resellers. Huh and Janakiraman [ 24 ] study periodic-review inventory replenishment problems with auctions and other sales channels and show that the optimality of s, S inventory replenishment policies extends well beyond the traditional sales environments studied so far in the inventory literature.
For a supplier that provides critical and customized components, the demand closely depends on, and hence is susceptible to, the variation of the final product demand. In the automotive industry, unstable and uncertain domestic volume of individual models is cited as one of the biggest challenges faced by manufacturers due to increased consumer choices [ 27 ]. The consumer electronics industry is notorious for risk stemming from short product life cycles and high demand uncertainty [ 28 ].
Furthermore, there is typically more uncertainty about the future demand than about the current demand.
Discrete Dynamics in Nature and Society
This demand uncertainty adds another source of future uncertainty, besides possible supplier switching in a short-term relationshipthat influences the decision of initial capacity investment.
Marketing is another end in supply chain. The collaboration with marketing science massively extends the domain of supply chain management. Pricing, promotion, and channel management are the three most important areas in this regard. Pricing and promotion are the central issues in marketing management, let alone under consideration of the supply chain environment.
Li and Graves [ 29 ] explore the pricing decisions during intergenerational product transition, by formulating the dynamic pricing problem and deriving the optimal prices for both the old and new products. The optimal initial inventory for each product is also determined, and a heuristic method is discussed.
Li and Zhang [ 30 ] study the preorder strategy that a seller may use to sell a perishable product in an uncertain market with heterogeneous consumers. Sainathan [ 31 ] considers pricing and ordering decisions faced by a retailer selling a perishable product with a two-period shelf life over an infinite horizon.
Sinitsyn [ 32 ] investigates the outcome of a price competition between two firms, each producing two complementary products. It is found that each firm predominantly promotes its complementary products together, which is correlationally supported by data in the shampoo and conditioner and in the cake mix and cake frosting categories.
Some counterintuitive findings suggest that the firms performing the advertising would rather bear the costs entirely if this protects their unit profit margin.
Operations Management of Logistics and Supply Chain: Issues and Directions
In addition, channel management is also an important interface between marketing and supply chain. They identify optimal dual channel strategies that depend on the channel environment described by factors such as the cost of managing a direct channel, retailer inconvenience, and some product characteristics.
Their analyses show that Internet retailers face significant competition from brick-and-mortar retailers when selling mainstream products but are virtually immune from competition when selling niche products.