Unit. 12 IntegratedLogisticssManagement
Unit. 12 Integrated Logistics Management
IntegratedLogisticsManagementToday,more and more companies are adoptingthe concept of integrated logistics management.This concept recognizesthat providing bettercustomer service and trimming distribution costsreguiresteamwork,both inside the company andamong all the marketing channel organizations.Insidethe company,the various functionaldepartments mustwork closelytogethertomaximizethecompany'sownlogisticsperformance.The company must also integrateitslogisticssystemwiththose ofits suppliersandcustomers to maximize the performance of theentiredistributionsystem
Integrated Logistics Management ◼ Today, more and more companies are adopting the concept of integrated logistics management. This concept recognizes that providing better customer service and trimming distribution costs requires teamwork, both inside the company and among all the marketing channel organizations. Inside the company, the various functional departments must work closely together to maximize the company’s own logistics performance .The company must also integrate its logistics system with those of its suppliers and customers to maximize the performance of the entire distribution system
IntegratedLogisticsManagementConcept Recognizes that ProvidingBetterCustomer Service andTrimming Distribution CostsReguiresTeamwork,Both Inside theCompany andAmong All the Marketing ChannelOrganizationsCross-FunctionalTeamworkinside the CompanyBuilding Channel PartnershipsIntegrated Logistics
3 Concept Recognizes that Providing Better Customer Service and Trimming Distribution Costs Requires Teamwork, Both Inside the Company and Among All the Marketing Channel Organizations. Cross-Functional Teamwork inside the Company Building Channel Partnerships Integrated Logistics Integrated Logistics Management
Cross-Functional Teamwork Inside the CompanyInmostcompanies,responsibilityforvariouslogistics activities is assigned to many differentfunctional units-marketing,sales,finance,manufacturing,purchasing.Too often,eachfunction tries to optimize its own logisticsperformance without regard for the activities ofthe other functions.However,transportationinventory,warehousing,and order processingactivities interact,often in an inverse way.Forexample,lower inventory levels reduceinventorycarrying costs.From stock-outs,backordersspecialproduction runs,and costly fast-freightshipments
Cross-Functional Teamwork Inside the Company In most companies, responsibility for various logistics activities is assigned to many different functional units—marketing, sales, finance, manufacturing, purchasing. Too often, each function tries to optimize its own logistics performance without regard for the activities of the other functions. However, transportation, inventory, warehousing, and order processing activities interact, often in an inverse way. For example, lower inventory levels reduce inventory carrying costs. From stock-outs, backorders, special production runs, and costly fast-freight shipments
Becausedistributionactivities involve strongtrade-offs,decisions by different functions mustbe coordinated to achieve superior overalllogisticsperformance.Thus,thegoal of integrated logisticsmanagement is to harmonize all of thecompany's distribution decisions. Close workingrelationships among functionscan beachieved inseveral ways.Some companies have createdpermanent logistics committeesmade up ofmanagers responsible for different physicaldistribution activities.These committees meetoftento set policies forimproving overall logisticsperformance
◼ Because distribution activities involve strong trade–offs, decisions by different functions must be coordinated to achieve superior overall logistics performance. ◼ Thus, the goal of integrated logistics management is to harmonize all of the company’s distribution decisions. Close working relationships among functions can be achieved in several ways. Some companies have created permanent logistics committees made up of managers responsible for different physical distribution activities. These committees meet often to set policies for improving overall logistics performance
Companies can also createmanagement positionsthat link the logistics activities of functional areas.Forexample,Procter&Gamblehascreated"supply managers"who manage all of the supplychain activitiesfor each of its product categoriesMany companies have a vice-president of logisticswith cross-functional authority.In fact,accordingto one logistics expert,three-fourths of all majorwholesalers and retailers,and a third of majormanufacturing companies,havesenior logisticsofficers at the vice president or higher level.Thelocation of thelogisticsfunctions within thecompanyisa secondary concern
◼ Companies can also create management positions that link the logistics activities of functional areas. For example, Procter & Gamble has created “supply managers” who manage all of the supply chain activities for each of its product categories. Many companies have a vice-president of logistics with cross-functional authority. In fact, according to one logistics expert, three-fourths of all major wholesalers and retailers, and a third of major manufacturing companies, have senior logistics officers at the vice president or higher level. The location of the logistics functions within the company is a secondary concern
BuildingChannelPartnershipsThe members of a distribution channel are linkedclosely indelivering customersatisfactionandvalue. One company's distribution system isanother company's supply system.The successofeachchannel memberdependson theperformance of the entire supply chain.Forexample,Wal-Mart can chargethelowest pricesatretail only if its entire supplychain-consistingof thousands of merchandise suppliers,transportcompanies,warehouses,and serviceproviders-operates atmaximumefficiency
Building Channel Partnerships ◼ The members of a distribution channel are linked closely in delivering customer satisfaction and value. One company’s distribution system is another company’s supply system. The success of each channel member depends on the performance of the entire supply chain. For example, Wal-Mart can charge the lowest prices at retail only if its entire supply chain—consisting of thousands of merchandise suppliers, transport companies, warehouses, and service providers— operates at maximum efficiency
Companies must domore than improvetheir ownlogistics.They must alsowork withotherchannelmembers to improve whole-channel distribution.Forexample,itmakes littlesense forLevi-Straussto ship finished jeans to its own warehouse,thenfrom these warehouses to JC Penney's stores.If thetwo companies can work together,Levi Straussmight be ableto ship much of itsmerchandisedirectlyto JC Penney's stores,saving time,inventory,and shipping costs for both.Today,smart companies are coordinating their logisticsstrategies and building strong partnershipswithsuppliers and customers toimprove customerservice and reducechannel costs
◼ Companies must do more than improve their own logistics. They must also work with other channel members to improve whole-channel distribution. For example, it makes little sense for Levi-Strauss to ship finished jeans to its own warehouse, then from these warehouses to JC Penney’s stores. If the two companies can work together, Levi Strauss might be able to ship much of its merchandise directly to JC Penney’s stores, saving time, inventory, and shipping costs for both. Today, smart companies are coordinating their logistics strategies and building strong partnerships with suppliers and customers to improve customer service and reduce channel costs
Thesechannel partnershipscantakemanyformsMany companieshave created cross-functionalcross-companyteams.For example,Procter&Gamble hasa teamof almost 100 people livingin Bentonville,Arkansas,homeof Wal-Mart.TheP&Gers work with their counterparts at Wal-Martto jointly find ways to squeezecosts out oftheir distributionsystem.Working togetherbenefits not only P&G and Wal-Mart,but alsotheir final consumers,Haggar Apparel Companyhasa similar system called"multiplepoints ofcontact,"in which a Haggar team works with JcPenney peopleat corporate,divisional,and storelevels
◼ These channel partnerships can take many forms. Many companies have created cross-functional, cross-company teams. For example, Procter &Gamble has a team of almost 100 people living in Bentonville, Arkansas, home of Wal-Mart. The P&Gers work with their counterparts at WalMart to jointly find ways to squeeze costs out of their distribution system. Working together benefits not only P&G and Wal-Mart, but also their final consumers, Haggar Apparel Company has a similar system called ”multiple points of contact,” in which a Haggar team works with JC Penney people at corporate, divisional, and store levels
Asaresultof thispartnership,Penneynowreceives Haggar merchandise within 18 days ofplacing an order-1o days fewer than its next bestsupplier.And Haggar ships the merchandise"floor ready"-hangered and pre-tagged-reducing the time it takes Penneyto move thestockfrom receiving docksto the sales floorfromfour daysto just one.Othercompanies partnerthroughsharedprojects.For example,many larger retailers areworking closely with suppliersonin-storeprograms
◼ As a result of this partnership, Penney now receives Haggar merchandise within 18 days of placing an order-10 days fewer than its next best supplier. And Haggar ships the merchandise “floor ready”—hangered and pre-tagged— reducing the time it takes Penney to move the stock from receiving docks to the sales floor from four days to just one. ◼ Other companies partner through shared projects. For example, many larger retailers are working closely with suppliers on in-store programs